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Film industry gets partial tax relief

The fierce lobbying of the film industry with the North block has resulted in partial tax relief . Finance Minister P Chadambaram in his budget speech said, "Last year, at the request of the film industry, full exemption of service tax was granted on copyright on cinematography. The industry has now requested to limit the benefit of exemption to films exhibited in cinema halls. I propose to accept the request.''

Last year when the industry asked for the exemption on the temporary transfer of copyrights, the industry didn't expect that the Government will bring all the services related to film production under the purview of service tax hence with this move of the government the film industry suffered heavily as the cost of the film went up by almost 12%. Says an industry insider, "post the last year's budget, we kept sending representations to the ministry and had many meetings to explain that this exemption had no meaning if the service tax continues to be on the cost and there is no tax on the output when we sell the rights. Various options were suggested to the government by the Producers Guild which you can see in the final representation sent to the finance ministry by us on 7th Jan 2013."

In this year's budget, the FM has announced that the service tax exemption will continue only on films released in cinema halls only hence the producers now can charge service tax on the non theatrical rights such as Music, Video, New Media and satellite etc.. With this change, the producers can set off the service tax charged to them by all those who provide services to the films such as Actors, Technicians, Directors, Shooting locations etc. With this change the film industry is likely to be benefited.

Film producers are much relieved. Apoorva Mehta of Dharma Production said," It implies that service tax will be brought back which is great news for the industry as earlier we were unable to offset the service tax incurred on the cost of production in the absence of service tax on copyright...this will certainly be a cost relief for producers and production houses, but full details will be needed on the scope of this levy to ascertain the actual relief."

Producer Mukesh Bhatt has been making several presentation to the information and broadcasting ministry appealing for tax concession for film industry which has been burdened by multiple taxes. Bhatt said, "We have got some relaxation which will set off about 3 per cent of our film production which is not good enough but it is better than getting nothing.''

The film industry in his proposal to the finance minister expected the government to restore service tax exemption on transmission of digital cinema. Bhatt said, "We expected relief in digital prints if the government is given us some relief in terms of exhibition that digital prints are part of it. We would like to request the finance minister to consider our plea for relief on digital cinema. If such benefit was granted by the government it would not only encourage us to go more digital and but also curb piracy which is eating into our business in a big way.''

Digitalisation of cinema has only helped growth of smaller and independent filmmakers who were expecting some relief on digital prints. Filmmaker Sanjay Puran Chauhan said, "If the to more people viewing the film, more prints for movies leading to bigger releases and yes, the audience pays less. They are digital screens get exemption for service tax, the movie industry will benefit hugely. Ticket costs of the films can then go down as well leading god and need to be appeased."